Introduce Sales and Operations Execution (S&OE)

to Improve Short-Term Planning Performance

Published 21 June 2021 - ID G00752628 - 9 min read
Supply Chain Research Team
Initiatives: Supply Chain Planning

Manufacturing organizations either lack a process dedicated to

operational execution or combine it with S&OP, preventing timely
resolution of short-term executional issues. Supply chain planning
leaders should review S&OE fundamentals and benefits to align
short-term planning and execution.

As an overview of this research, Figure 1 provides actionable recommendations for supply

chain planning leaders to introduce S&OE by defining its components and benefits.

Gartner, Inc. | G00752628 Page 1 of 10

This research note is restricted to the personal use of delapenaperezrene@bfusa.com.

Figure 1: Recommendations for Introducing S&OE

Well created and executed sales and operations planning (S&OP) plans have the potential
to impact business performance significantly. However, according to the 2018 Gartner
S&OP Success Survey, 1 almost half of the respondents reported that they are unable to
effectively link S&OP decisions to operational executional activities. This gap exists
because there is no formal process to support short-term planning. This prevents the
organizations from taking timely actions if execution diverges from planning significantly,
thus creating inefficiencies such as poor inventory health and service levels.

Sales and operations execution (S&OE) bridges this gap by aligning S&OP plans to
execution (Figure 2), thus helping S&OP reach its full potential. According to simulation
studies performed by Adexa, 2 a typical S&OP plan can only be as accurate as 40% to 65%
but with S&OE, its accuracy can increase to 98% or more.

Gartner, Inc. | G00752628 Page 2 of 10

This research note is restricted to the personal use of delapenaperezrene@bfusa.com.

Figure 2: Business Planning Processes and Alignment

Supply chain planning leaders are increasingly recognizing the need to implement an
S&OE process. Building foundational knowledge about S&OE is the crucial first step to
implementing it. To build this understanding, this research is distilled into three parts:

1. Definition and purposes of S&OE

2. Core components of S&OE — cadence, time horizon, granularity, metrics and roles

3. Key agenda items, inputs, outputs and benefits of S&OE

Definition and Purposes of S&OE

Gartner, Inc. | G00752628 Page 3 of 10

This research note is restricted to the personal use of delapenaperezrene@bfusa.com.

S&OE is the process of decision making to balance short-term demand and supply. S&OE
process is the interface that is used for translating the results of the S&OP process into
executable details. These details drive the short-term actions in the end-to-end supply
chain. Once the plans are being executed, S&OE provides a checkpoint for the supply
chain and business leaders to ensure that the reality and plans remain aligned, and allows
them to take timely action if any significant deviation between the two is detected. It
includes recurring meetings (with regular cadence) which drive discussions around short-
term items such as event planning (for events such as customer promotions, tenders and
new product introductions [NPIs]), demand and supply exceptions and trade-off decisions
(see Figure 3).

Figure 3: S&OE Meeting Agenda Items

Gartner, Inc. | G00752628 Page 4 of 10

This research note is restricted to the personal use of delapenaperezrene@bfusa.com.

Unlike S&OP, the S&OE process does not include multiple meetings with completely
different agendas. Instead, the S&OE process focuses on tracking the execution of S&OP
plans that were developed several months ago, typically at least the current month minus
three. It thereby balances short-term demand and supply changes to optimize profitability,
cost, revenue, inventory and service. The key purposes of S&OE are to:

■ Manage execution priorities: There is a need to manage and prioritize executional

issues that impact demand and supply because even the most accurate plans can’t
support the business unless they are executed successfully. S&OE helps manage
priorities associated with the execution of S&OP plans by providing a platform to
highlight, analyze and finalize decisions and actions that help deal with executional
issues.

■ Balance short-term plans: Without a formal process that focuses on short-term

planning, demand and supply planners have less visibility into short-term supply
chain issues and the decisions taken to manage those issues. Due to this, the short-
term volatility seems worse than it may be. S&OE meetings help manage this noise
and provide a more controlled mode of operations to the supply chain by facilitating
discussions on short-term focused agenda items such as prioritization of deliveries,
customer promotion changes review and inventory levels update.

■ Manage out-of-plan (OOP) exceptions: Deviations between planning and execution

can either be minor and have no significant impact on supply chain, or major such
that they require escalation. S&OE helps tackle the impact of these major deviations.
As a part of the S&OE process, stakeholders define a certain threshold to identify the
need for escalation. OOP exceptions (that exceed predefined thresholds) that are not
detected and acted upon early push the organizations into a reactive, firefighting
mode. This causes expedites of raw materials and frequent rescheduling of the
production and outbound priority transportation to meet customer expectations.
S&OE helps manage OOP situations by providing visibility into the deviations of
actual demand and supply from the planned ones. The visibility helps planners
intercept the exceptions, pull in the appropriate stakeholders, and develop a response
that will minimize disruption to the supply chain while considering business
priorities.

Core Components of S&OE

See Table 1 for a baseline understanding of the core components of S&OE:

Gartner, Inc. | G00752628 Page 5 of 10

This research note is restricted to the personal use of delapenaperezrene@bfusa.com.

Table 1: Core Components of S&OE — Illustrative
(Enlarged table in Appendix)

Key Agenda Items, Inputs, Outputs and Benefits of S&OE

See Table 2 to review key operational inputs, agenda items and outputs of demand and
supply side S&OE.

Gartner, Inc. | G00752628 Page 6 of 10

This research note is restricted to the personal use of delapenaperezrene@bfusa.com.

Table 2: Key Inputs, Agenda Items and Outputs of S&OE
(Enlarged table in Appendix)

Benefits of S&OE
■ Real-time visibility into demand/supply situation: The S&OE process provides
visibility into the impact of the demand/supply imbalance on supply chain
performance. For example, supply planners can track the shipped orders against the
delivery and customer service level KPIs. If the metrics deviate from the predefined
thresholds, planners can escalate this concern, providing visibility into the deviation.
Planners and cross-functional stakeholders can thus identify major supply
disruptions and assess their impact on customer service, inventory and cost metrics
in time.

Gartner, Inc. | G00752628 Page 7 of 10

This research note is restricted to the personal use of delapenaperezrene@bfusa.com.

■ Prioritization of decisions: S&OE can be used to prioritize decisions to optimize cost,
service and inventory. For example, demand planners can use S&OE meetings to
assess the alignment between daily customer order volumes and monthly forecasts.
Once demand planners have visibility into actual demand, they can communicate
this to supply planners. Let’s say SKU09 is the most profitable product for your
organization and the actual demand for it turns out to be more than planned. Supply
planners can then update the master schedule according to the actual demand. To
be able to follow the updated master schedule for this SKU, S&OE meeting
participants can assess the cost implications of prioritizing the production of SKU09
over other SKUs. Commercial can then make the trade off to increase the production
of SKU09 accordingly.

■ Efficient response to unanticipated changes: Constant changes in demand and

supply can be managed by using the S&OE process as the primary forum for real-
time response planning. During S&OE meetings, planners work closely with other
business functions, customers and suppliers to get the latest demand and supply
inputs, and finalize actions to respond to developments such as demand surges,
shutdowns, materials shortages and capacity issues. For example, companies that
experience sharp increases in demand can use S&OE to allocate products across
customers based on key prioritization principles that reflect their strategies (see 3
Must-Do Steps in the Allocation Management Process). In cases of low demand,
S&OE can be used to focus on reducing factory output and in case of immediate
supplier shutdowns or material shortages, it can be used to identify alternative raw
materials for manufacturing products that are more likely to get sold.

To close the gaps between planning and execution, there is a need to implement S&OE.
S&OE helps supply chain planning leaders match demand and supply across a shorter
planning horizon, thus helping them manage exceptions. They should familiarize
themselves with the concept of S&OE and begin the initiative by defining the S&OE
process and determining its planning horizon, granularity, meeting cadence, participants
and the metrics that validate its success. They should also define its inputs, action items
and outputs to successfully implement the process and realize its benefits.

Recommended by the Authors

Supply Chain Score for Planning

Podcast: Key Lessons From Tractor Supply’s Successful S&OE Initiative

Gartner, Inc. | G00752628 Page 8 of 10

This research note is restricted to the personal use of delapenaperezrene@bfusa.com.

Video: IBP and S&OE — Agility and Enhanced Decision Making in Volatile Times at Diageo
Africa

Set Up Sales and Operations Execution Process to Support the S&OP Cycle

Endnotes
1
2018 Gartner S&OP Success Survey. This survey explored the way organizations
initiate, structure and develop their S&OP process in order to grow their business and
achieve strategic objectives. The research aimed to understand how S&OP’s impact
increases as the process matures, and how organizations have used it to achieve greater
business value. The survey was conducted online by an external partner, between June
and August 2018.

In total, 304 respondents were interviewed in native language across the U.S. (n = 65,
21%), Canada (n = 35, 12%), Germany (n = 52, 17%), U.K. (n = 49, 16%), China (n = 48,
16%), Singapore (n = 30, 10%), Hong Kong (n = 14, 5%) and Taiwan (n = 11, 4%);
percentages may not add to 100% due to rounding. Interpret small base sizes (n < 30) with
caution.

To enable the comparison and contrasting of key trends, the following quotas were
established on key organizational and respondent characteristics:

■ Qualifying organizations operate in manufacturing (high-tech, industrial, consumer,

life sciences, chemicals) or retail industries, with total revenue for the whole
company in FY17 of at least $250 million or equivalent. All organizations have either
a formal S&OP process already in place or an unstructured demand- and supply-
balancing type of process.

■ Qualified participants have a primary job or department in marketing, sales, finance,

operations, IT, supply chain or customer service, and are personally involved in
leading the S&OP process.

The survey was developed collaboratively by a team of Gartner analysts who follow these
markets and was reviewed, tested and administered by Gartner’s Research Data and
Analytics team.

Disclaimer: Results of this study do not represent “global” findings or the market as a
whole but are a simple average of results for the targeted countries, industries and
company-size segments covered in this survey.

Gartner, Inc. | G00752628 Page 9 of 10

This research note is restricted to the personal use of delapenaperezrene@bfusa.com.

 2
 Predict, Not Just Respond, Adexa.

Note 1: Master Production Schedule Adherence

Master production schedule (MPS) is a plan prepared for factories to produce goods in a
specific period of time. The MPS adherence metric is a measure of the extent to which a
master production schedule is followed.

© 2021 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of
Gartner, Inc. and its affiliates. This publication may not be reproduced or distributed in any form
without Gartner's prior written permission. It consists of the opinions of Gartner's research
organization, which should not be construed as statements of fact. While the information contained in
this publication has been obtained from sources believed to be reliable, Gartner disclaims all warranties
as to the accuracy, completeness or adequacy of such information. Although Gartner research may
address legal and financial issues, Gartner does not provide legal or investment advice and its research
should not be construed or used as such. Your access and use of this publication are governed by
Gartner’s Usage Policy. Gartner prides itself on its reputation for independence and objectivity. Its
research is produced independently by its research organization without input or influence from any
third party. For further information, see "Guiding Principles on Independence and Objectivity."

Gartner, Inc. | G00752628 Page 10 of 10

This research note is restricted to the personal use of delapenaperezrene@bfusa.com.

Table 1: Core Components of S&OE — Illustrative

Component Description

Cadence Weekly

Time Horizon 0-13 weeks

Granularity ■ Time: Week

■ Product: SKU
■ Customer level

Metrics ■ Demand plan consumption

■ Master production schedule (MPS) adherence (see Note 1)

■ Distribution plan adherence

■ Transportation costs

■ Service
■ Inventory health

■ Manufacturing site utilization

Roles ■ Facilitator: S&OE coordinator — Direct report to supply chain planning

leader

Gartner, Inc. | G00752628 Page 1A of 4A

This research note is restricted to the personal use of delapenaperezrene@bfusa.com.

 ■ Decision maker: Direct report to S&OP commercial leader (usually in
mature organizations, S&OP commercial leader is P&L owner)

■ Participants:
■ Supply chain participants:
■ Demand planning
■ Supply planning

■ Manufacturing operations

■ Distribution requirements planning

■ Supplier management and sourcing

■ Logistics and transportation

■ Customer service teams

■ Cross-functional participants:
■ Sales

■ Marketing
■ Finance

■ Commercial

■ Product development teams

Source: Gartner

Gartner, Inc. | G00752628 Page 2A of 4A

This research note is restricted to the personal use of delapenaperezrene@bfusa.com.

Table 2: Key Inputs, Agenda Items and Outputs of S&OE

Agenda Items Inputs Outputs

Demand Side S&OE ■ Track forecast consumption ■ SKU/location/customer range ■ Plan of action to respond to
demand plan demand plan vs. booking gap
■ Assess bookings against range
plan: ■ Independent requirements plan ■ New insights to demand plan
■ Volume and timing active in execution system details

■ Volatility ■ Sales order bookings ■ Demand update:

■ On track as planned
■ Forecast error history
■ Manage out of plan (OOP) risk: ■ Trending off track; monitoring
■ New demand insights
■ Analyze ■ Off track: respond
■ Current events
■ Investigate
■ NPI demand update
■ Alert supply planner

■ Identify scenarios to resolve OOPs

■ Report-out at S&OE meeting

Supply Side S&OE ■ Track production schedule ■ SKU/location/customer range ■ Plan of action to respond to supply
adherence demand plan plan vs. projected manufacturing
output gap
■ Assess inventory projections vs. ■ Master schedule active in
plan execution system ■ New insights to drivers of supply
chain volatility

Gartner, Inc. | G00752628 Page 3A of 4A

This research note is restricted to the personal use of delapenaperezrene@bfusa.com.

 ■ Assess production plan against ■ Sales order bookings ■ Supply update (including supplier):
MPS ■ On track as planned
■ Forecast error history
■ Track customer service level ■ Trending off track; monitoring
■ New demand insights
attainment
■ Off track: respond
■ Current events
■ Manage out-of-plan (OOP) risk:
■ Analyze ■ NPI supply update
■ Inventory projection vs. plan
■ Investigate

■ Alert demand planner

■ Identify options to resolve OOPs

■ Report-out at S&OE meeting

Source: Gartner (June 2021)

Gartner, Inc. | G00752628 Page 4A of 4A

This research note is restricted to the personal use of delapenaperezrene@bfusa.com.